Mexico joins ESG index rush with Cancún launch

Mexico is the latest country to create a benchmark on sustainability performance for investors as demand for sustainable investment products explodes in emerging markets. The Bolsa Mexicana de Valores’ (Mexican Stock Exchange, MSE) sustainability index will be formally launched at this week’s United Nations Climate Change Conference in Cancún.
Thus far in 2010, the Istanbul Stock Exchange (ISE) and the Brazilian Stock Exchange (BM&FBOVESPA) have signed the UNPRI and several stock exchanges have launched SRI/Sustainability indices including the Indonesia Stock Exchange (the KEHATI–SRI Index), the Shanghai Stock Exchange (Social Responsibility Index), and the Egyptian Exchange (S&P/EGX ESG Index). The Johannesburg Stock Exchange, as part of its implementation of the PRI, has upgraded its ESG reporting requirements to include integrated reporting on a ‘comply or explain’ basis, making South Africa the first country to mandate the disclosure of financial and non-financial performance in one integrated report for all listed companies. The Mexican Sustainability Index will be based on the 60 most liquid shares on the Mexican Stock Exchange and the sustainability assessments will be conducted according to a methodology developed by EIRIS to assess Mexican companies according to international standards on ESG performance. Catalina Clave, director of statistics and information products and manager of the sustainability index project at the MSE was keen to ensure that the Mexican companies selected for the index were comparable with their global peers. As a result of the MSE’s approach, the announced sustainability index has generated considerable buzz inthe CSR community in Mexico. The exchange hosted the second in a series of breakfasts for Mexican companies eligible for the index on November 16th in Mexico City to provide details on the inclusion criteria and the philosophy behind the index. Luisa Montes of EIRIS’s local partner in Mexico, Ecobanca, has been working closely with the companies eligible for inclusion to explain the methodology and assessment framework. Each company is assessed separately on the three ESG pillars and their performance, impact and responses to emerging ESG issues. They must obtain a score in each area which puts it on a par with sustainablity practices globally, which the MSE believes is essential for the index to have credibility and wide-spread acceptance by the investment community. Dr Luis Hernandez vice-president, finance of CONSAR the Mexican pension funds’ regulator echoed this concern and stressed his organisation’s interest in promoting the highest standards of transparency among their regulated funds. The MSE is also the first sustainability index to explictly incorporate compliance with international norms and standards into their selection criteria. We will assess how companies eligible for the index deal with serious allegations of problems on the ground in the areas of environment, human rights, labour standards, bribery and the production of illegal weapons. Stock exchanges around the world –particularly in emerging markets – are embracing the view that they have a key role to play in promoting sustainability, transparency and greater disclosure by their listee companies.
Lisa Hayles is head of client services (North America) at Eiris.